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Sri Lanka’s Millennium Housing Developers Plc, a publicly traded company said it was investing 5 billion rupees to develop luxury apartments and affordable housing to meet growing demand, despite fears of a bubble.
Sri Lanka’s land and apartment prices started to rise rapidly from 2015, with the central bank printing money but interest rates have since risen, slowing the market.

However chronic currency depreciation from inconsistent central bank policy is killing consumer demand and purchasing power, which may be hitting a small recovery, critics say.

Millennium Housing said concerns have been raised about a property bubble bursting in 2020 -2022 by some.

“With demand for luxury apartments and condominiums going up and supply at times overtaking demand, the bubble certainly seems like a possibility,” the firm said.

“However, supply of affordable housing is estimated to be below demand as yet.”

There was a demand for housing from people migrating from rural to urban areas, particularly to Greater Colombo townships.

“This shift in the urban landscape is predominantly influenced by location and convenience factors related to employment and business proximities,” Chairman HarshithDharmadasa said.

“At the higher end of the spectrum, investments by Sri Lankans who are living abroad are notable and will continue to surge if and when greater political stability is evident.”

Dharmadasa noted that people were seen favouring smaller apartments.

“The propensity of demand for vertical properties offered by apartment complexes is particularly favoured due to the availability of multiple facilities and the perception of household security,” he said.

Millennium Housing Development reported revenues of 1.7 billion rupees in the year to end March 2018, up 31 percent from a year ago. Profits grew 25 percent to 185.5 million rupees.

Earlier this year, Millennium completed its 64-unit The Heights – Edmonton and launched three new projects to be completed in two years.

Millennium Housing Development began as a developer of housing estates under its ‘Millennium City’ brand. It has developed 3,000 houses with a combined floor area of three million square feet across ten housing estate projects.

The company now has plans to build up to 400 houses at three new locations over the next two years.

Over the next few years, real estate growth is expected to be driven by increased demand for affordable residential and retail property by wealthy residents, and local and international corporates, the company said.

Nearly 55 percent of all tenants spend more than 30 percent of their income on housing, and about 30 percent of tenants paid more than half their income on rent.

High rents were affecting the incomes of every income group in Colombo.

“The demand for affordable housing is illustrated by the response to new housing lotteries,” the firm said.

A key reason for Sri Lanka’s unaffordable housing is excessively high cost of building materials kept high import duties to give profits to so-called oligarchs who have close connection to politicians and are opposing free trade for the poor. Steel for house building in particular is heavily taxed.